The microstructure of the Irish stock market

Patricia L. Chelley-Steeley, Brian M. Lucey

Research output: Contribution to journalArticlepeer-review

Abstract

This is the first paper to examine the microstructure of the Irish Stock Market empirically and is motivated by the adoption, on June 7th of Xetra the modern pan European auction trading system. Prior to this the exchange utilized an antiquated floor based system. This change was an important event for the market as a rich literature exists to suggest that the trading system exerts a strong influence over the behavior of security returns. We apply the ICSS algorithm of Inclan and Tiao (1994) to discover whether the change to the trading system caused a shift in unconditional volatility at the time Xetra was introduced. Because the trading mechanism can influence volatility in a number of ways we also estimate the partial adjustment coefficients of the Amihud and Mendelson (1987) model prior and subsequent to the introduction of Xetra. Although we find no evidence of volatility changes associated with the introduction of Xetra we do find evidence of an increase in the speed of adjustment (JEL: G15).
Original languageEnglish
Pages (from-to)279-311
Number of pages33
JournalMultinational Finance Journal
Volume12
Issue number3-4
Publication statusPublished - Sep 2008

Bibliographical note

© 2008 The Authors

Keywords

  • trading systems
  • adjustment speed
  • cross listing
  • microstructure

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